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Get your taxes done using TurboTax
@Nkm171964 , sorry for the delay in responding.
My source for my opinion are IRC sections 7702, section 1297, form 8621 and instructions for the form 8621. While I cannot find any data on Bajaj ULIP for purposes of the Income Test and/or Asset Test called out in section 1297(b) and (e), I am pretty sure that the IRS will still classify this as a PFIC. I would strongly recommend you to be at least familiar with these sections.
Because my personal opinion is that you being a participant in PFIC ( even though one policy in thousands at least ), perhaps there should be another look at this. Major taxing issue with PFICs is that the income from these ( as defined in section 1297 and 7702 ) is viewed as ordinary income rather than capital gain when final distribution occurs. Sop if I assume that this policy does not distribute/ declare any income ( dividends, interest, gain ) i.e. none constructively received by the participant, then why not view this as an annuity with both aggregation and growth periods being concurrent. If this is allowed then when the policy is terminated, (a) you recognize the whole gain as described in section 7702 as ordinary gain and pay taxes on it per the US rules ( very similar to what you would for a pension or an annuity total distribution; (b) this would also have the advantage of being a foreign sourced income and therefore taxes paid to India would be eligible for FTC. As I said this is my own opinion but I have NO case law to support my view. And actual execution of this view should cause NO loss of taxes to the IRS or the state if one assumes that during the life of this contract, your world income is the same or grows. This will not be the case if your world income decreases during this period.
Is there more I can do for you ?